B-156891, JUN. 25, 1965

B-156891: Jun 25, 1965

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BIDDERS WERE FURNISHED A SUMMARY OF THE RISK EXPERIENCE FOR THE PERIOD JULY 1. BIDS WERE OPENED ON MAY 21. THE LOW BID ON ITEM 1 WAS SUBMITTED BY PLYMOUTH MUTUAL LIFE INSURANCE COMPANY. THE LOW BID ON ITEM 2 WAS SUBMITTED BY RELIANCE INSURANCE COMPANY. WAS THE THIRD LOW BIDDER ON BOTH ITEMS. IT IS YOUR POSITION THAT THE LOSS FIGURES SET FORTH IN THE IFB. WHICH WERE SUPPLIED BY PLYMOUTH AS THE PREVIOUS CARRIER. ARE OF DOUBTFUL VALIDITY. THE BASIS FOR THIS ALLEGATION IS THAT FOR THE CALENDAR. THE ALLEGED LOSS EXPERIENCE ON THE STATE DEPARTMENT CONTRACT IS SUBSTANTIALLY GREATER THAN THAT FILED WITH THE DISTRICT OF COLUMBIA UNDER OATH. "IF THE LOSS EXPERIENCE DESCRIBED IN THE INVITATION IS INACCURATE.

B-156891, JUN. 25, 1965

TO DEW, LOHNES AND ALBERTSON:

YOUR LETTER OF MAY 27, 1965, PROTESTS, ON BEHALF OF NATIONAL CITY COMPANY, WASHINGTON, D.C., ANY AWARD BY THE DEPARTMENT OF STATE OF A CONTRACT FOR HEALTH AND ACCIDENT INSURANCE COVERAGE FOR FOREIGN NATIONALS AND AMERICANS STUDYING ABROAD AS GRANTEES UNDER THE SPONSORSHIP OF THE DEPARTMENT'S BUREAU OF EDUCATIONAL AND CULTURAL AFFAIRS, UNDER INVITATION FOR BIDS NO. CU-65-1, ISSUED APRIL 30, 1965.

THE IFB SOLICITED BIDS FOR THE FURNISHING OF HEALTH AND ACCIDENT INSURANCE COVERAGE FOR THE PERIOD JULY 1, 1965, THROUGH JUNE 30, 1968, (1) FOR GRANTEES UNDER THE PROGRAM SPONSORED BY THE BUREAU (GOVERNMENT- PAID PREMIUMS) AND (2) FOR THE ACCOMPANYING DEPENDENTS OF SUCH GRANTEES AND PARTICIPANTS IN OTHER GOVERNMENT OR NON-GOVERNMENTAL EXCHANGE OR TRAINING PROGRAM (SELF-PAID PREMIUMS). ON PAGE 3 OF THE IFB, BIDDERS WERE FURNISHED A SUMMARY OF THE RISK EXPERIENCE FOR THE PERIOD JULY 1, 1962, THROUGH MARCH 31, 1965, UNDER THE CONTRACT EXPIRING JUNE 30, 1975, REFLECTING TOTAL LOSSES OF $532,266.31.

BIDS WERE OPENED ON MAY 21, AS SCHEDULED IN THE IFB. THE LOW BID ON ITEM 1 WAS SUBMITTED BY PLYMOUTH MUTUAL LIFE INSURANCE COMPANY, THE CARRIER OF SUCH INSURANCE UNDER CONTRACT FOR THE PERIOD JULY 1, 1962, THROUGH JUNE 30, 1965. THE LOW BID ON ITEM 2 WAS SUBMITTED BY RELIANCE INSURANCE COMPANY. PROVIDENT INDEMNITY LIFE INSURANCE COMPANY, FOR WHOM NATIONAL CITY SERVED AS AGENT, WAS THE THIRD LOW BIDDER ON BOTH ITEMS.

IT IS YOUR POSITION THAT THE LOSS FIGURES SET FORTH IN THE IFB, WHICH WERE SUPPLIED BY PLYMOUTH AS THE PREVIOUS CARRIER, ARE OF DOUBTFUL VALIDITY. THE BASIS FOR THIS ALLEGATION IS THAT FOR THE CALENDAR. YEARS 1962, 1963 AND 1964, THE LOSSES REPORTED BY PLYMOUTH TO THE DISTRICT OF COLUMBIA TOTALLED ONLY $423,741.38. IN THIS CONNECTION, YOU MAKE THE FOLLOWING STATEMENTS:

"* * * THE LOSS EXPERIENCE REFLECTED IN THE INVITATION SHOULD BEAR SOME CLOSE RESEMBLANCE TO THE LOSSES REPORTED TO THE DISTRICT OF COLUMBIA SINCE THE STATE INSURANCE PRESUMABLY WOULD BE REPORTED AS PART OF THE DISTRICT OPERATIONS OF PLYMOUTH; NEVERTHELESS, THE ALLEGED LOSS EXPERIENCE ON THE STATE DEPARTMENT CONTRACT IS SUBSTANTIALLY GREATER THAN THAT FILED WITH THE DISTRICT OF COLUMBIA UNDER OATH.

"IF THE LOSS EXPERIENCE DESCRIBED IN THE INVITATION IS INACCURATE, THEN ONLY ONE BIDDER WOULD HAVE THE ABILITY TO EVALUATE WHAT THE PROPER RATE PER MAN-MONTH SHOULD BE. SIGNIFICANTLY, THE LOSSES PER MAN MONTH FOR THE PAST TWO YEARS AND NINE MONTHS ON THE STATE DEPARTMENT CONTRACT AMOUNT TO $2.516 PER MAN-MONTH. THE LOW BID IN THIS CASE WAS $2.15 PER MAN-MONTH, A BID SUBMITTED BY THE CURRENT CARRIER WHO ALSO FURNISHED THE INFORMATION ON LOSS EXPERIENCE FOUND IN THE INVITATION.

"NATIONAL CITY BELIEVES THAT THE DISCREPANCY BETWEEN THE DISTRICT OF COLUMBIA DATA AND THAT FOUND IN THE INVITATION CREATES A SERIOUS DOUBT AS TO WHETHER THE PURPOSES OF ADVERTISED PROCUREMENT ARE BEING ACHIEVED IN THIS CASE. IT IS AXIOMATIC IN PROCUREMENT LAW THAT AN INVITATION SHOULD BE COUCHED IN TERMS THAT ALLOW ALL BIDDERS TO HAVE AN EQUAL OPPORTUNITY TO OBTAIN THE PROCUREMENT AND ALLOWS THE GOVERNMENT TO PAY THE LOWEST COST FOR THE SERVICE. WHEN, HOWEVER, AN INVITATION RESULTS IN ONLY ONE BIDDER HAVING A REAL CHANCE AT AN AWARD, BOTH PURPOSES OF ADVERTISED PROCUREMENT ARE FRUSTRATED.

"ACCORDINGLY, NATIONAL CITY REQUESTS THAT AN AWARD IN THIS CASE BE DELAYED UNTIL THE AFOREMENTIONED DISCREPANCY IS INVESTIGATED. IN THE EVENT THE DISCREPANCY CANNOT BE SATISFACTORILY EXPLAINED, IT IS REQUESTED THAT THE INVITATION BE SET ASIDE IN ITS ENTIRETY AND REISSUED WITH ACCURATE LOSS EXPERIENCE DATA. * * *"

BY LETTER DATED JUNE 15, THE DEPARTMENT OF STATE HAS FORWARDED TO OUR OFFICE A REPORT OF A SURVEY CONDUCTED BY ONE OF ITS AUDITORS ON THE BASIS OF YOUR PROTEST OF PLYMOUTH'S RECORDS, PLYMOUTH'S REPORTS TO THE DEPARTMENT, AND THE STATEMENTS FILED BY PLYMOUTH WITH THE DISTRICT OF COLUMBIA. THE AUDIT REPORT STATES THAT IT IS IMPOSSIBLE TO RECONCILE WITH EXACTNESS THE LOSS FIGURES SHOWN IN THE IFB WITH THE LOSS FIGURES REPORTED TO THE DISTRICT OF COLUMBIA FOR THE SAME PERIOD IN VIEW THAT THE LATTER FIGURES COVER CALENDAR YEARS AS OPPOSED TO THE POLICY YEARS USED IN THE IFB. HOWEVER, IT IS STATED THAT EXAMINATION OF PLYMOUTH'S BOOKS FOR THE PERIOD JULY 1, 1962, THROUGH MARCH 31, 1961, SHOWS THAT PLYMOUTH'S ACTUAL LOSS PAYMENTS ON THE INSURANCE INVOLVED TOTALLED $407,689.14 AND THAT THE OUTSTANDING LOSSES AS OF MARCH 31, 1965, FOR THE POLICY YEARS 1963/64 AND 1964/65 AMOUNT TO $124,577.17, OR A TOTAL LOSS OF $532,266.31 FOR THE PERIOD IN QUESTION. FOLLOWING IS A SUMMARY SHOWING THE RECONCILIATION OF THE ACTUAL PAYMENT FIGURES WITH THE FIGURES REPORTED TO THE DISTRICT OF COLUMBIA FOR THE PERIOD JULY 1, 1962, THROUGH DECEMBER 31, 1964, AND THE PERIOD JANUARY 1 THROUGH MARCH 31, 1965, WHICH IS TO BE INCLUDED IN THE REPORT TO BE FILED WITH THE DISTRICT OF COLUMBIA BY MARCH 1, 1966:

TABLE

LOSSES PAID PER ANNUAL STATEMENTS $346,549.87

(DISTRICT OF COLUMBIA ONLY)

ADD:

LOSSES PAID 1/1-3/31/65 50,571.02

CREDIT ADJUSTMENTS NOT INCLUDED 3,161.72

REINSURANCE ON PAID CLAIMS 74,135.65

$474,418.26

DEDUCT: ACCOUNTS OTHER THAN STATE $66,223.30

UNLOCATED DIFFERENCES 505.82

66,729.12

LOSSES PAID ON POLICY FOR 62/63,

63/64 AND 64/65 TO 3/31/65 $407,689.14

THE AUDIT REPORT FURTHER STATES AS FOLLOWS:

"THE FIGURES IN THE LETTER OF PROTEST RELATING TO PREMIUMS AND LOSSES REPORTED BY PMLIC TO THE DISTRICT OF COLUMBIA WERE NOT COMPARABLE IN THAT THE AMOUNT OF $110,947.73 FOR DIRECT EARNED PREMIUMS FOR CALENDAR YEAR 1962 WAS THE AMOUNT IN THE FIRST REPORT WHEREAS THE REVISED REPORT SHOWED THAT AMOUNT TO BE $55,473.86. THE D.C. INSURANCE DEPARTMENT REQUESTED THE REVISED AMOUNT TO BE SHOWN BECAUSE THE REINSURER FOR 50 PERCENT OF STATE'S BUSINESS WRITTEN WAS NOT FOUND QUALIFIED TO DO BUSINESS IN THE DISTRICT UNTIL A FEW DAYS AFTER THE END OF CALENDAR YEAR 1962. ALSO THERE WAS A SMALL TRANSPOSITION IN THE AMOUNT OF INCURRED LOSSES. THE CORRECT FIGURE PER THE ANNUAL STATEMENT WAS $45,227.30 WHEREAS THE LETTER OF PROTEST SHOWED THE AMOUNT TO BE $45,237.20. IT SHOULD BE NOTED THAT THE ANNUAL STATEMENT IS PREPARED ON A CALENDAR YEAR BASIS AND MUST BE PREPARED IN ACCORDANCE WITH SOUND INSURANCE ACCOUNTING PRINCIPLES AND IN A MANNER CONSISTENT WITH RELATED ITEMS. THE ANNUAL STATEMENTS WERE PREPARED IN COMPLIANCE WITH D.C.'S PRESCRIBED INSTRUCTIONS PERTINENT TO THE APPLICABLE YEAR. FOR CALENDAR YEARS 1962 AND 1963, DIRECT PREMIUM WRITINGS WERE SHOWN AFTER ADJUSTMENT FOR REINSURANCE CEDED WHEREAS FOR CALENDAR YEAR 1964 THE DIRECT PREMIUMS WERE SHOWN AS WRITTEN IN THE DISTRICT OF COLUMBIA EXCLUDING REINSURANCE ACCEPTED AND WITHOUT DEDUCTION OF REINSURANCE CEDED.'

FROM THE FOREGOING, IT APPEARS THAT THE FIGURES SUPPLIED BY PLYMOUTH AND USED IN THE IFB FOR THE PURPOSE OF INDICATING THE PROBABLE RISK ARE AS ACCURATE AS COULD BE PROVIDED IN THE CIRCUMSTANCES, AND ARE SUBSTANTIALLY IN ACCORD WITH THE REPORTS TO THE DISTRICT OF COLUMBIA AUTHORITIES. ACCORDINGLY, WE FIND NO LEGAL BASIS TO QUESTION EITHER THE VALIDITY OF THE IFB OR THE GOOD FAITH OF THE LOW BIDDER, AND YOUR PROTEST IS THEREFORE DENIED.